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2018 Top 202: Investor Interest

Why the c-store industry is a 'vibrant' space for investors today

CLEVELAND -- Whether public or private, investor interest in the convenience-store industry “is vibrant right now,” says Gregg Budoi, a Cleveland-based consultant working closely with, among other companies, Lariat Partners, Denver.

C-stores have experienced several consecutive years of record-breaking profits while remaining an extremely fragmented channel. The structure of many c-store chains—particularly those with wholesale-fueling roots—is also very attractive, he says. Typically, these family-owned companies are a tight bundle of modular income streams, any one of which could be broken off and sold.

“[Investors] can get into a platform by buying more stores, getting economies of scale and flipping the business to a larger strategic buyer or private-equity group,” Budoi says. With traditional jobbers, the wholesale-fuel business, c-stores and real estate can each be sold separately for a higher total return.

“You really can do a lot of financial engineering around these deals.”

Still, not all investment activity in the c-store space involves breaking a business apart. The high-profile industry stalwarts—think Wawa, Sheetz or RaceTrac—are all plowing profits back into their own  reinventions.

Tulsa, Okla.-based QuikTrip, for example, is intent on remaking its entire chain of 765 stores to its latest-generation, foodservice-focused format.

“Everything for us has a long-term objective,” says Mike Thornbrugh, spokesperson for QuikTrip. “We’re methodical in everything we do. It’s no secret: We really have been concentrating on our food offers and other c-store items and on the gasoline side.”

Of course, the whole point of comparing private companies against public (and, to a degree, private equity) is that shareholder pressure is considerably more severe on the public vs. the private side.

But the larger point is that the flow of dollars is constant and fluid. Most of the time, no one complains when Mother Nature is doing her thing. They only bristle when chasing the promise of profit works against the sustainability of a thriving business.

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